Panels are subclasses of java.awt.Panel. A panel is contained inside another container, or perhaps inside the web browser's window. Panels do not stand on their own. Applets are panels.
Windows are subclasses of java.awt.Window. A window is a free-standing, native window. There are two kinds of windows: frames and dialogs. A frame is an instance of a subclass of java.awt.Frame. It represents a normal, native window. A dialog is a subclass of java.awt.Dialog. A dialog is a transitory window that exists merely to impart some information or get some input from the user.